Self-storage operators in Florida are preparing for a change in sales tax to be applied to unit rentals starting next month. An amendment to the state’s real estate sales-tax law, passed in May, will drop the sales tax on commercial rent by .2 percent statewide, reducing the tax from 6 percent to 5.8 percent in every county except Miami-Dade, which will fall from 7 percent to 6.8 percent. Though the update technically went into effect on July 1, it will only affect rent on new leases, including self-storage, beginning Jan. 1. Rent paid on leases signed prior to Jan. 1 will stay at their current rate, according to a source.
“This tax reduction is minuscule; a tenant only saves 20 cents per month on a space that rents for $100 per month. It also creates an administrative headache for self-storage operators who must modify systems to calculate the tax correctly,” said national Self Storage Association officials in a Dec. 4 e-mail newsletter to members. “Operators will need to modify their accounting software, so that they are charging the correct sales tax on January 2018 rents.”
Florida is the only state that imposes a sales tax on rent, according to “The National Law Review.” The commercial-rent sales tax has existed since 1969. “There has been a movement to repeal this tax for several years, but it should be noted that Florida’s general revenue stream is very heavily reliant on sales tax in general,” the source reported. “For the 2016-17 fiscal year, the sales tax accounted for 78.5 percent of all such revenue.”
The real estate sales tax is higher in Miami-Dade County because it has a 1 percent local-option surtax. Florida authorizes local-level government to use eight different discretionary sales surtaxes, though not all are available to every county. There are also caps based on certain combinations, according to Florida TaxWatch, a non-partisan watchdog group. “The maximum potential local sales tax rate in Florida ranges from 1.5 percent to 4 percent, but the highest rate currently in effect is 1.5 percent (in 10 counties),” according to its website. “Eleven counties do not levy any local-option sales tax. Most of these taxes are not widely used, and only three of them are levied in more than three counties.”
- Florida TaxWatch: Local Option Sales Taxes
- The Monday Morning Globe, 12/4/17: Storage Operators Need to Prepare for New Florida Real Estate Tax
- The National Law Review: Florida Sales Tax on Commercial Rents Reduced